According to the survey statistics of the SMM analysis team on sample data from aluminium rod producers nationwide, as of July 2024, China's aluminium rod industry had an existing capacity of 7.488 million mt, with the overall operating capacity showing a stable trend. In June (30 days), the total output of aluminium rods nationwide was 345,000 mt, a decrease of 4,000 mt compared to May (31 days), representing a reduction of 1.15%. Due to the low aluminium rod conversion margins and cost, some producers in Inner Mongolia, Ningxia, and Sichuan and Chongqing regions have taken measures for production suspension and maintenance. The operating rate of domestic aluminium rod producers in May was 55.3%, a decrease of 0.9 percentage points compared to May. However, in the second half of this month, the transaction situation in the aluminium rod market improved, and the in-plant inventory of aluminium rod producers showed a dwindling trend. Considering the current cost factors and the improved market transaction expectations, it is anticipated that the aluminium rod output in July will see a slight rebound.
By region, currently, Inner Mongolia's production decreased by 4,500 mt, followed by Henan with a MoM decrease of 2,600 mt. Jiangsu, Qinghai, and Sichuan saw slight declines due to cost reasons or production halts for maintenance. Additionally, due to the recovery of downstream demand, Yunnan's production increased by 2,200 mt MoM, and Xinjiang's production rose by 1,000 mt, showing a slight recovery in production.
Regarding processing fees, in June, the average ex-factory processing fee of ordinary rods in Shandong recorded 291 yuan/mt, up 80 yuan/mt from May. In Henan, the average ex-factory price recorded 348 yuan/mt, up 87 yuan/mt from the previous month. In Inner Mongolia, the average ex-factory processing fee of ordinary rods recorded 251 yuan/mt, up 160 yuan/mt from the previous month. In Guangdong, the average delivery to factory processing fee recorded 516 yuan/mt, up 128 yuan/mt from May. In Hebei, the average delivery to factory processing fee recorded 353 yuan/mt, up 123 yuan/mt. In Jiangsu, the average delivery to factory processing fee recorded 462 yuan/mt, up 124 yuan/mt from the previous month. Overall, the market processing fees showed a significant recovery.
Market transactions: In June, aluminum prices saw a significant pullback, cooling consumption expectations. The prices were weak, which instead boosted consumption in the aluminum rod market, improving end-users' willingness to take delivery and aiding in the rise of processing fees. In the segmented market, numerous ultra-high voltage projects were launched, driving strong demand. Leading aluminum wire producers have maintained high operating rates since the beginning of this year, providing strong support for the consumption of high-conductivity aluminum rods. Regarding alloy rods, photovoltaic projects have underperformed expectations this year, with market projects facing funding turnover issues, leading to weakened end-user delivery enthusiasm. Consequently, the alloy rod market has not been excessively hot. Meanwhile, due to the pullback in aluminum prices and delivery of provincial grid orders, operating rates of downstream small and medium-sized enterprises have warmed up, significantly improving sentiment towards ordinary rods and slightly alleviating the oversupply situation.
Overall, constrained by production costs and the current market acceptance, the production of aluminium rods continued to decline in June, remaining at a relatively low level compared to the same period in the past three years. Subsequently, with the market demand gradually improving, the inventory within aluminum rod factories was gradually digested, and the factories are expected to gradually shift to scheduled production, returning to the peak demand season. Demand side, the end-user market continued to exert strength, with the high-conductivity rod and ordinary rod markets expected to gain momentum, while the alloy rod market remained cautious. Considering the current situation, it is expected that the average ex-factory processing fee of ordinary rods will continue to rebound in July, with overall performance mainly characterized by strong fluctuations.
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